Medical Billing Blog

MedPAC Submits Annual Report to Congress

Posted by Scott Shatzman on Mon, Jul, 07, 2014 @ 07:07 AM

Medpac1 resized 600And speaking of MedPAC, each year the Commission releases a June report advising Congress on issues affecting the Medicare program including broader changes in health care delivery and the market for health care services. The latest June report focuses on making the Medicare program more consistent by reforming Medicare payment models, risk adjustment payments, primary care service payments, and select condition payments.


The Commission’s report discusses measures to achieve more consistency by synchronizing Medicare payment rules and incentives across all of Medicare’s three payment models by setting a common spending benchmark—tied to local Fee-For-Service (FFS) spending—for Medicare Advantage (MA) plans and Affordable Care Organizations (ACOs). 


In the report, MedPAC examines three methods to improve how well risk adjustment predicts costs for the highest and lowest cost Medicare Advantage beneficiaries.  However, each method would involve some degree of cost-based payment, which MedPAC says could lead to less incentive for plans to manage care and hold down cost and lead to more incentives to up-code claims.

To reduce incentives for providers to overuse and overprovide services among Medicare beneficiaries, MedPAC recommends transitioning from clinical process measures to population-based outcome measures. Population-based outcome measures would facilitate quality comparison across Medicare’s three payment models—MA,FFS, and ACOs—and would help improve health outcomes.


MedPAC also recommends expanding income eligibility for the Medicare Savings Programs to better help low-income Medicare beneficiaries afford out-of-pocket costs under a redesignedFFSbenefit package. Reiterating a suggestion made in 2008, the Commission thinks that Congress should align eligibility for the Part B savings program with the Part D low-income drug subsidy criteria and extend Part B premium subsidies to beneficiaries with incomes of up to 150 percent of the federal poverty level.


The Commission addresses concerns over primary care services being undervalued by the Medicare fee schedule by recommending that Medicare replace the current primary care bonus program with a per-beneficiary payment method. The Commission asserts that a per-beneficiary method will facilitate better care coordination, since it would provide some amount of payment for the non-face-to-face activities practitioners perform, such as making telephone calls to patients or specialists to whom their patients are referred.


Finally, the Commission continues to push for more consistency in payment rates for Medicare beneficiaries with certain similar conditions in different locations. Comparing three medical conditions, the Commission assesses the feasibility of paying inpatient rehabilitation facilities the same rates as skilled nursing facilities for patients recovering from these conditions.


The following are the highlights of some of the key chapters.


Synchronizing Medicare Policy Across Payment Models


The Commission seeks to achieve more consistency for the payment rules and quality incentives for each of the three Medicare payment models, which are (1) traditional fee-for-service (FFS), (2) Medicare Advantage (MA), and (3) accountable care organizations (ACOs). All three have a unique set of payment rules and quality improvement incentives. The report examines how to synchronize these policies across payment models with respect to spending benchmarks, risk adjustment, quality measurement and regulatory oversight.


The Commission believes that to encourage beneficiaries to choose the model that they perceive as having the highest value in terms of cost and quality, the Medicare program should pay the same on behalf of each beneficiary making the choice. The Medicare program could not subsidize one choice more than another and still be financially neutral with respect to the beneficiary’s choice.


The Commission maintains that, over the long run, Medicare’s payment rules and quality improvement incentives will need to be reconciled across the three payment models. Without synchronization across the models, the program could be paying more to one model for the same or lower quality care than that provided by the other models in the same market.


This chapter of the report focuses on setting a common spending benchmark based on local FFS spending for MA plans and ACOs as a key element of these synchronization efforts. The MA benchmark is how much Medicare pays for a beneficiary’s enrollment, on average, compared to what it pays for a traditional FFS beneficiary. For each county, CMS sets the MA benchmark. An MA plan’s payment from Medicare is based on how its bid compares with the local MA benchmark, which represents the maximum amount Medicare will pay to a plan in a given area on behalf of an MA enrollee.


ACOs are different from MA plans in that Medicare directly pays providers FFS rates. The ACO then is paid shared savings based on the difference between what the program paid to providers and the ACO’s benchmark. In the end, MA plans and ACOs face similar financial incentives. However, ACOs avoid the extra cost of enrolling beneficiaries and paying claims, while MA plans face these extra overhead costs.


Both currently have different benchmarks and market factors that result in inconsistent subsidies from Medicare. The Commission conducted simulations that manipulated the benchmarks to try to achieve consistencies among the three payment types. The commission simulated pairing payment models with the benchmark of a different payment model. The report illustrates that no single payment model is uniformly less costly than another model across all markets. Which model is least costly and which ACOs and MA plans may want to enter the program in a given area would be sensitive to how benchmarks are set.


The Commission specifies that this is only an initial exploration of synchronizing these Medicare policies in this way and that this is not intended to be a “definitive or comprehensive discussion.” In the future, the Commission plans to explore synchronizing regulatory oversight, as well as the beneficiary perspective on synchronizing policies across payment models, including how beneficiaries learn about the Medicare program, choose plans, and respond to financial incentives. The report also indicates that quality incentives and regulatory efforts should be synchronized as well.


Per Beneficiary Payment for Primary Care


This chapter discusses MedPAC’s concern that primary care services are undervalued by the Medicare fee schedule. According to the report, specialists, such as radiologists, can earn twice as much as primary care providers. For example, the reports states that radiologists' average annual compensation in 2010 was $460,000, while the average for primary care physicians was $207,000. "Such disparities in compensation could deter medical students from choosing primary care practice, deter current practitioners from remaining in primary care practice, and leave primary care services at risk of being underprovided," the Commission wrote.


Over the years, the Commission has made several recommendations to address the undervaluation of primary care services in the fee schedule relative to other services. In 2008, the Commission made a recommendation to establish a budget-neutral primary care bonus payment, funded by a reduction in payments for non–primary care services. In 2010, the Patient Protection and Affordable Care Act established a primary care bonus program which created a 10 percent bonus payment for eligible primary care services provided by primary care practitioners from 2011 to 2015. However, this program, which expires at the end of 2015, was not budget neutral and thus required additional funds.


With the 2015 expiration date approaching, the Commission considers this to be a good opportunity to revisit the structure of payment for primary care.  The Commission believes the additional payments to primary care practitioners should continue but is concerned that the fee-for-service (FFS) method is not the proper payment mechanism for primary care.


In this Chapter, the Commission considers an option to continue the additional payments to primary care practitioners, but in the form of a per-beneficiary payment, replacing the primary care bonus payment. According to the Commission, while the current FFS approach encourages volume, a per-beneficiary approach is intended to foster care coordination as it would provide some amount of payment for the non-face-to-face activities the practitioner performs, such as making telephone calls to patients or specialists to whom their patients are referred. In establishing a per-beneficiary payment for primary care, the Commission has considered several design issues: practice requirements for receipt of the payment, attribution of beneficiaries to primary care practitioners, and funding. Specific to funding, they have considered two methods. One method is to fund a pe- beneficiary payment by reducing the payments of all services that are not eligible for the current primary care bonus payment by an equal percentage. A second method is to reduce the payments of services specifically identified as overpriced, service by service, and fund the per beneficiary payment with the savings. 


The Commission plans to continue work on these issues, including design considerations for a per-beneficiary payment: the payment amount; requirements that practices must meet to receive the payment; mechanisms for attributing beneficiaries to practitioners or practices; and, methods for funding a per-beneficiary payment.


The Commission can only make recommendations.  It is up to Congress to enact those recommendations requiring statutory changes or CMS to adopt regulations to effect those recommendations requiring regulatory changes. 


It is not clear that any of these proposed changes recommended by MedPAC will be adopted anytime soon by either Congress or CMS, but they are an indication of the direction the Commission believes payment policy should be headed. 


Thanks to Bill Finerfrock, Matt Reiter, Lara Burt, Cassy Perkins and Carolyn Bounds for contributing this article.